Suppose Ford sold an issue of bonds with a 15-year maturity, a $1,000 par value, a 12%
Question:
(a) Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 9%. At what price would the bonds sell?
(b) Suppose that, two years after the bonds' issue, the going interest rate had risen to 13%. At what price would the bonds sell?
(c) Today, the closing price of the bond is $783.58. What is the effective current yield?
Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...
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